Insurance Companies Withdraw from Syria – What About Earthquake Risks

Reinsurance options are scarce following the withdrawal of European, Western, and foreign reinsurers, primarily due to the war and economic sanctions in Syria, Athr Press reports.

The Director General of the Insurance Supervisory Authority, Dr. Rafid Mohammed, informed Athr Press that insurance companies, both the Syrian General Insurance Corporation and private entities, settle claims for natural disasters, including earthquakes, based on their capabilities and the availability of reinsurance.

Mohammed highlighted a critical challenge faced by the insurance sector since 2012—the lack and weakness of reinsurance options following the withdrawal of European, Western, and foreign reinsurers, primarily due to the war and economic sanctions in Syria. He emphasized that this deficiency hampers the ability of companies worldwide, including the Syrian market, to insure against natural disasters.

Tartous Farmers Struggle to Access Diesel

He stated, “The absence of reinsurance today poses challenges for companies in insuring natural disasters due to the unique nature of this insurance type. Disaster insurance involves a concentration of risks occurring simultaneously, leading to substantial losses. This challenge extends globally, and without reinsurance, no insurance company in the world can adequately cover earthquakes or natural disasters; it is an inherent necessity in the global insurance industry. The lack of reinsurance options weakens companies’ capacity to insure against natural disasters.”

Regarding the current state of affairs, Mohammed continued, “In 2022, the insurance market reached a consensus that disaster insurance would cover 25% of the insured value. For instance, if a residential house worth one billion Syrian pounds is insured against fire for the same amount, its insurance against earthquakes would be 250 million, or 25% of the fire insurance value. This approach safeguards companies from facing overwhelming losses due to the aggregation of insured risks.”

The Director of the Insurance Supervisory Authority pointed out that during the earthquake on February 6, insured risks were identified in Aleppo, Latakia, and affected areas, and insurance companies were duly compensated according to their contractual obligations. In response to this, he stated, “We took a unique approach by creating an earthquake insurance complex, mandating the compulsory insurance of all homes, factories, and real estate in Syria against earthquakes.”

Explaining the rationale behind this mandatory initiative, Mohammed noted, “When insurance becomes mandatory, the law of large numbers is applied, resulting in significantly lower premiums. This is a practical, scientific, technical, and insurance principle; earthquakes cannot be feasibly insured in any other way to ensure fair compensation for the affected parties, especially considering the inadequacy of available insurance options. Mandatory insurance aligns with the essence of insurance—solidarity among all parties.”

Mohammed also addressed the ongoing practice of companies insuring earthquakes within limited bounds based on their capabilities, emphasizing the normality of this approach. He stressed, “We cannot expect insurance companies to underwrite risks beyond their financial capacity, as it would jeopardize the stability of the insurance sector, thereby compromising their obligation to policyholders.”

 

This article was translated and edited by The Syrian Observer. The Syrian Observer has not verified the content of this story. Responsibility for the information and views set out in this article lies entirely with the author.

Features



Recommend article

Sender's Name:
Sender's Email:
Receiver's Name:
Receiver's Email: